L Brands Lowers Earnings Outlook -- Update
06 January 2017 - 5:01AM
Dow Jones News
By Imani Moise and Khadeeja Safdar
L Brands Inc. lowered its profit outlook for the holiday quarter
as sales continued to slump at the company's core Victoria's Secret
lingerie business.
Same-store sales at Victoria's Secret fell 4% in December from a
year earlier. Strength at the company's Bath & Body Works chain
and PINK, a division aimed at younger consumers, was offset by
declines in lingerie and apparel categories.
Victoria's Secret, which accounts for two-thirds of L Brands'
business, has been using heavy promotions to drive traffic to its
stores and website, but the markdowns have also been impacting
margins. The company said the merchandise margin rate in December
fell significantly from a year ago and was below expectations.
Shares of the company, which are down more than 35% over a year,
fell 8% to about $62 in midday trading. The retailer joined
department-store chains Macy's Inc. and Kohl's Corp. in reporting
weak sales for the critical year-end season.
Analysts at Jefferies expect the weakness at Victoria's Secret
to continue into fiscal 2018 as competition rises and reliance on
promotions continues. They attribute the declining sales to a
consumer shift toward more attainable beauty standards and emerging
competition from brands such as American Eagle Outfitters Inc.'s
Aerie.
Last year, L Brands Chief Executive Les Wexner took charge of
Victoria's Secret and announced big changes, including shifting
away from catalog mailings and getting out of the swimwear
business. Instead of coupons, the company has been using aggressive
markdowns to attract customers to items like sports bras and
bralettes.
Mr. Wexner also changed leadership at Victoria's Secret. He
hired former Coach Inc. executive Greg Unis to invigorate the
brand's stalling beauty business and former Spanx Inc. CEO Jan
Singer to oversee the core lingerie category.
For the five weeks ended Dec. 31, net sales rose 1% to $2.44
billion but same-store sales decreased by 1%, compared with an 8%
increase a year earlier. Analysts had expected same-store sales to
increase 0.6% overall.
The Ohio-based company now expects earnings per share to be on
the low end of its previous guidance of $1.85 to $2 for the fourth
quarter. Wall Street was expecting $1.92 per share, according to
Thomson Reuters.
Write to Imani Moise at imani.moise@wsj.com and Khadeeja Safdar
at khadeeja.safdar@wsj.com
(END) Dow Jones Newswires
January 05, 2017 12:46 ET (17:46 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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